States decide essential benefits.

• Author: Cauchi, Richard
• Position: HEALTH REFORM: SPECIAL REPORT

States have long required insurance companies to offer certain benefits. More than 1,500 state laws mandate coverage, although they apply to different types of insurance. Idaho, for example, has only seven mandated services, Iowa has 20, while Florida has 40 and Maryland 55. By 2014, policies sold through exchanges, and most new plans sold to individuals and small employers, will have to cover the minimum or "essential" benefits approved by the federal government.

The federal law calls for states to pay consumers' costs for any state-mandated benefits not deemed essential by the new law and under rules to be issued by the U.S. Department of Health and Human Services (HHS).

Most observers expected a national, one-size-fits-all definition of essential benefits.

But last December, the HHS proposed giving states unexpected flexibility in deciding which of several existing insurance plans--small group plans, state and federal employee health plans, HMOs--to use as a benchmark for required coverage in their own states.

Under the proposed new rules, state officials will be able to choose among several plans that already cover their state-mandated benefits and have one such plan designated the HHS-approved standard. Essential benefits will then vary among states but states won't have to pay extra for consumers to purchase services required under state mandated benefits. The standards will apply to policies bought through exchanges as well as those sold outside of exchanges. The proposed rules may help states avoid...